Manhattan's "prime" retail real estate remained under pressure in the fourth quarter as the once too prominent shopping areas have transformed into "ghost towns."
According to Bloomberg, retail rents across every major shopping district in the borough are plunging as a revitalization of the local economy continues to stall.
Mayor DeBlasio's solution to mitigate the virus spread has been restricting or banning indoor capacity at restaurants and limit mass gathering. More government regulation has hindered the local recovery.
As if brick and mortar retail didn't have enough problems to deal with considering the massive push towards e-commerce during the pandemic, Soho retail rents in the fourth quarter dropped 22% to $290 a square foot over the same period last year, according to a report by brokerage Cushman & Wakefield Plc.
Rents in Soho have been sliding for four years. They may eventually pressure commercial real estate firms who own buildings as higher vacancies and lower rents could reduce rental income, making it harder for them to service mortgages.
Lower Fifth Avenue retail rents in the quarter dropped 20%. Rents in upscale Madison Avenue declined 16%.
Considering the pandemic, strict social distancing measures from the city government, and the explosion in e-commerce, it is nearly impossible for most to open retail stores and do business in once prominent areas of downtown Manhattan.
Cushman & Wakefield said the supply of retail space in most areas is surging. Availability rates in Fifth Avenue, Soho, and Meatpacking are about 24%.
From 57th to 72nd streets, Madison Avenue had a shocking 40% availability rate for the second straight quarter.
Herald Square/West 34th Street was the only area in the borough that experienced a decline in available retail space.
With the retail bubble now popped, there were more than 9,300 retail department store closures across the US in 2020.
The retail space remains oversupplied with stores, and the consolidation of stores countrywide could continue for the next couple of years.
To sum up, the new normal in Manhattan will be high retail vacancies and lower rents with a local economy unable to recovery this year.